Hello and welcome to the AES Corporation Fourth Quarter and Full Year 2023 Financial Review call. My name is Elliot and I'll be coordinating your call today. I would now like to hand over to Susan Harcourt, Vice President of Investor Relations. The floor is yours. Please go ahead.

Thank you, operator. Good morning and welcome to our fourth quarter and full year 2023 financial review call. Our press release, presentation and related financial information are available on our website at aes.com. Today we will be making forward-looking statements. There are many factors that may cause future results to differ materially from these statements, which are disclosed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, our President and Chief Executive Officer, Steve Coughlin, our Chief Financial Officer and other senior members of our management team. With that, I will turn the call over to Andres.

Good morning, everyone, and thank you for joining our fourth quarter and full year 2023 financial review call. Today I will discuss our 2023 strategic and financial performance. Steve Coughlin, our CFO, will discuss our financial results and outlook in more detail shortly. Beginning on slide three, 2023 was our best year ever as we met or exceeded all of our strategic and financial objectives, including signing a record of 5.6 gigawatts of new PPAs, putting us well on track to achieve 14 to 17 gigawatts of new signings through 2025, completing 3.5 gigawatts of construction, exceeding the target we laid out and doubling our additions compared to 2022, delivering adjusted EBITDA of $2.8 billion in the top end of our guidance range and adjusted EBITDA with tax attributes of $3.4 billion, achieving adjusted EPS of $1.76 and parent-free cash flow of just over $1 billion, both beyond the top end of our guidance ranges, and realizing asset sales proceeds of $1.1 billion, significantly above our target of $400 million to $600 million. Turning to slide four, despite the backdrop of rising interest rates and supply chain challenges across the sector, we demonstrated that our business model is strong, resilient, and well-positioned. Demand across the sector has never been stronger, and in this context, I'm pleased to announce that we are raising our expected annual growth rate for adjusted EBITDA and adjusted EPS. We now expect our adjusted EBITDA to grow at an annual rate of 5% to 7% and adjusted EPS to grow at 7% to 9%, both through 2027. We are also reaffirming all of our other existing guidance. I can definitely say that I have never felt better about the outlook for this business. Turning to power purchase agreement signings on slide five, we signed 5.6 gigawatts of new PPAs in 2023, more than any other year in our company's 43-year history, putting us well on track to sign 14 to 17 gigawatts of new renewable contracts from 2023 through 2025. Today, our backlog of projects with signed PPAs is 12.3 gigawatts, the vast majority of which will be commissioned over the next three years. It is worthwhile to note that all of the projects in our contracted backlog remain on track for timely completion, consistent with our historical performance. Moving to slide six, I'd like to highlight that the largest segment of our new business is with corporate customers. In fact, in 2023, nearly 60% of the 3.5 gigawatts of projects we brought online were to serve corporate customers and large technology companies in particular. Bloomberg New Energy Finance has consistently named AES as one of the top two providers of renewable energy to corporations worldwide, and our business continues to expand, particularly given our focus on serving the power needs from data centers which are powering the rapid growth of AI. We are well positioned to serve this customer segment for a number of reasons. First, we have been on the forefront of working directly with these technology companies to provide innovative solutions to achieve specific renewable energy profiles. Back in 2021, we were the first company to introduce hourly match renewable energy, and today we are working with all of the hyperscale data center companies to provide solutions that are tailored for their renewable energy and sustainability goals. Second, we have a strong track record of delivering our projects on time, on budget, while meeting the unique needs of our customers, which I will cover in more detail momentarily. Our record of reliability is something that is increasingly recognized and valued by our customers. And third, we have the scale and the pipeline to address growing demand from data centers, which is estimated to more than double by 2030. With over 50 gigawatts of projects in our development pipeline and advanced interconnection queue positions in the most relevant markets in the U.S., we are particularly well positioned to meet the energy demand of technology customers. Turning to slide seven, our success with corporate customers combined with our improved efficiency in development and construction have increased the returns that we have seen across our renewable portfolio. As a result, we are upping our U.S. return ranges by 200 basis points to 12% to 15% on a levered after-tax cash basis. We are seeing even higher returns internationally. With strong market demand in AES's leading position, we are able to be increasingly selective about the projects we build with a focus on those with the best overall financial benefits. Next, turning to construction on slide eight, our ability to complete projects on time and on budget has become a major differentiator for AES. Not only is this something that our customers highly value, but it is also a pillar of our business model and ensures that our realized financial returns are on average equal to or better than our projections. At the time of PPA signings, we lock in contractual arrangements for all major equipment, EPC, and long-term financing, which we hedge to ensure no interest rate exposure. At the same time, we systematically embed flexibility in our supply chain to safeguard against a variety of scenarios. We also have a multi-year strategic arrangement with top suppliers, including Fluence, who we see as having the most competitive product in the industry. More than half of our solar projects in recent years have co-located storage components, and our relationship with Fluence helped us to have the best on-time project completion rate in the industry. In 2024, we feel very confident in our ability to add 3.6 gigawatts of new projects, including 2.2 gigawatts in the U.S. We currently have 100% of the major equipment for these projects contractually secured and nearly 80% already on site. Now turning to our utilities, beginning on slide nine. In 2023, we achieved important milestones at our U.S. utilities that will drive future growth, continue decarbonization, and improvement in customer service. At AES Ohio, we put in place a new regulatory framework, and at AES Indiana, we reached a unanimous settlement for our first-rate case since 2018. As a result, investments are on track for the rate-based growth in the high teens at both utilities, and we now have close to 70% of our planned investments through 2027 already approved in regulatory orders. Turning to slide 10. At AES Ohio, we are embarking on the largest investment program that this utility has ever seen, which includes the expansion and enhancement in our transmission assets. With over 25% rate-based growth per year, this is one of the fastest transmission growth rates in the country. We also recently filed for regulatory approval of the second phase of our smart grid plan, which upgrades our grid to improve service quality and customer experience. Turning to slide 11. At AES Indiana, we continue to invest to improve service quality and greener generation mix. I am happy to say that we now have regulatory approval for the build-out of all named renewable projects at AES Indiana, encompassing 106 megawatts of wind, 445 megawatts of solar, and 245 megawatts of energy storage. As we continue to invest in our customer experience, service quality, and sustainability at both of our U.S. utilities, two core principles have guided our growth plan. First is customer affordability as we address much-needed investments. We currently have the lowest residential rate in both states, which we expect to maintain throughout this period of growth. And second is to prioritize the timely recovery of our investments through existing mechanisms and programs. Across both utilities, we now anticipate approximately 75% of the growth capital to be deployed under such mechanisms, which substantially reduces regulatory lag. Finally, turning to slide 12. Last year, we set an asset sale proceeds target of $400 million to $600 million. We greatly exceeded this range with $1.1 billion of gross proceeds. These transactions not only put a high valuation marker on our businesses, but also put us well on our way towards achieving our asset sales goal of $2 billion through 2025 and $3.5 billion through 2027. Our success this past year provides us with a cushion, and we expect 2024 to be another strong year. With that, I would like to turn the call over to our CFO, Steve Coughlin.

Thank you, Andres, and good morning, everyone. Today, I will discuss our 2023 results and capital allocation, our 2024 guidance, and our updated expectations through 2027. As Andres mentioned, 2023 was AES's best year on record as we met or exceeded all of our strategic and financial targets. We beat our adjusted EPS guidance range of $1.65 to $1.75 and our parent-free cash flow guidance range of $950 million to $1 billion. We also recorded strong adjusted EBITDA well above the midpoint of our inaugural guidance range of $2.6 billion to $2.9 billion. Turning to slide 14, full year 2023 adjusted EBITDA with tax attributes was $3.4 billion versus $3.2 billion in 2022, driven primarily by contributions from new renewables projects, as well as the recovery of prior year's purchase power costs at AES Ohio included as part of the ESP4 settlement. These drivers were partially offset by lower contributions from the energy infrastructure SBU. Turning to slide 15, adjusted EPS was $1.76 in 2023 versus $1.67 in 2022. Drivers were similar to those for adjusted EBITDA with tax attributes. In addition, there was a $0.06 headwind from parent interest on higher debt balances primarily used to fund new renewables projects. I'll cover our results in more detail over the next four slides, beginning with the Renewable Strategic Business Unit or SBU on slide 16. Higher adjusted EBITDA with tax attributes at our renewables SBU was primarily driven by contributions from the 3.5 gigawatts of new projects that came online in 2023, as well as higher margins in Columbia, but partially offset by the sell down of select U.S. renewable operating assets. At our utilities SBU, higher adjusted PTC was primarily driven by the recovery of prior year's purchase power costs at AES Ohio included as part of the ESP4 settlement, as well as rate-based growth in the U.S. Lower adjusted EBITDA at our energy infrastructure SBU reflects significant LNG transaction margins in 2022, lower margins in Chile, and the sale of a minority interest in our Southland combined cycle assets. These drivers were partially offset by the higher revenues recognized from the accelerated monetization of the PPA at our Warrior Run coal plant. Finally, at our new energy technologies SBU, higher adjusted EBITDA reflects improved results at Fluence, which achieves positive adjusted EBITDA in their fiscal fourth quarter of 2023. Fluence also guided to positive adjusted EBITDA for their full fiscal year 2024. Now let's turn to how we allocated our capital last year on slide 20. Beginning on the left-hand side, Sources reflect $3 billion of total discretionary cash. This includes parent-free cash flow of just over $1 billion, which increased nearly 11% from the prior year to just above the top end of our guidance. We also significantly surpassed our asset sale target with $750 million in net asset sales proceeds to the AES parent after subsidiary level debt repayment, reinvestment, and taxes. And we issued $900 million of parent debt in May of last year. Moving to Uses on the right-hand side, we invested more than $2.1 billion in growth at our subsidiary, of which approximately two-thirds was in the U.S. We also allocated more than $500 million of discretionary cash to our dividends. Overall, I'm extremely pleased with our financial performance throughout 2023. Now let's turn to our guidance and expectations, beginning on slide 21. Today, we're initiating 2024 adjusted EBITDA with tax attributes guidance of $3.6 billion to $4 billion, driven by over $500 million in contributions from new renewables projects and from rate-based growth at our U.S. utilities. We have also incorporated a $200 million partially offsetting impact from asset sales we either closed in 2023 or plan to close this year. Excluding the $1 billion in tax attributes we expect to recognize in 2024, adjusted EBITDA is expected to be $2.6 billion to $2.9 billion. The increase in tax attributes versus the prior year is partially due to our continued use of tax credit transfers, which results in earlier recognition of tax credit than typical tax equity structures. In addition, last year's increase in new project completions will drive higher tax attribute recognition in 2024. As a reminder, we will recognize approximately one-third of tax attributes generated on 2023 projects in the 2024 fiscal year. Looking beyond this year, our head start on asset sales gives us greater visibility toward our longer-term growth and puts downward pressure on our capital budget. We expect EBITDA to increase each year through the remainder of our long-term guidance period. Turning to slide 22, we expect 2024 adjusted EPS of $1.87 to $1.97, which represents a 9% increase year-over-year and puts us on track to achieve our 7% to 9% long-term growth target through 2025. Growth will be primarily driven by our renewables and utilities businesses and will be partially offset by higher parent interest. We also expect an 8% headwind from asset sales. Our construction program this year is more evenly spread than in recent years. As a result, we expect approximately 40% of our earnings to be recognized in the first half of the year and 60% in the second half. And we will have greater visibility throughout the year into our expected construction completion. Turning to slide 23, as Andres mentioned, our very strong market position in providing tailored solutions to corporate clients, including large data centers, has allowed us to realize higher returns on our renewables projects. In addition, as our renewables business continues to scale, we anticipate further realization of productivity and scale benefits. Based on these factors and our 2023 results, we now expect AES's U.S. renewables returns to be in the 12% to 15% range. These higher returns in the U.S., along with productivity benefits, are directly accreted to our earnings and cash flow, and as a result, we are increasing our expected long-term adjusted EBITDA growth rate to 5% to 7% and our long-term adjusted EPS growth rate to 7% to 9% through 2027 off of the base of our 2023 guidance midpoint. Now, turning to our 2024 parent capital allocation plan on slide 24, beginning with approximately $3.1 billion of Sources on the left-hand side. Parent free cash flow for 2024 is expected to be around $1.05 billion to $1.15 billion. We expect to generate $900 million to $1.1 billion of net asset sale proceeds this year. By the end of this year, we expect to be more than halfway toward the $3.5 billion gross asset sales target we announced on our third quarter earnings call. Although we expect an increase of approximately $1 billion of parent debt this year, our business is well insulated from changes in interest rates. Our new projects are funded primarily with fixed rate or long-term hedged self-amortizing debt with tenors similar to the length of our PPAs, and more than 80% of our outstanding debt is non-recourse to AES Corp. Our exposure from floating rates and future issuances is managed with nearly $8 billion in outstanding hedging. Looking at the impact of a 100 basis point shift in rates on our future issuances, refinancing and outstanding U.S. floating rate debt, we have only one penny of EPS exposure from interest rates in 2024. Now to the Uses on the right-hand side. We plan to invest approximately $2.6 billion in new growth, of which about 85% will be allocated to growing our renewables portfolio and utility rate base. More than 90% of this will be directed into the U.S., with the remainder going to growth projects in Chile and Panama. We expect to allocate approximately $500 million to our shareholder dividend, which reflects the previously announced 4% increase. Turning to slide 25, our long-term sources of parent capital through 2027 reflect the accelerated asset sales target we introduced on our third quarter call. We also expect higher organic cash generation as a result of our increased long-term growth rates. As a reminder, we will not issue any new equity until 2026 at the earliest, and we'll only do so in a way that creates value on a per-share basis. Now to slide 26. Uses through 2027 reflect more than $7 billion of investment in our subsidiaries, primarily to grow our renewables and utilities businesses. We also expect to allocate more than $2 billion to our dividend. Given our surplus of attractive investment opportunities and our desire to minimize equity issuance as a source of capital, we now expect to grow our dividend at 2% to 3% annually beyond 2024. We believe this provides an optimal balance between an already attractive dividend yield and strong earnings and cash flow growth throughout our planned period. In summary, 2023 was an extraordinary year for AES. We demonstrated our ability to adapt to the current market and execute on our growth commitments while we further advanced our competitive position. As we continue to perfect and scale our renewables machine, we expect to have another record year in 2024 and to deliver on our now higher long-term growth target. We have positioned AES to achieve our strategic priorities and grow our business in a way that's highly value accretive to our shareholders.

Thank you, Steve. In summary, 2023 was our best year ever as we met or exceeded all of our strategic and financial objectives across our guidance metrics, PPA signings, construction completions, and asset sales. We are seeing strong demand for renewables across the sector, particularly due to the unprecedented demand from data centers. As a result, we are not only upping our U.S. project return ranges, but increasing our expected average annual growth rates for adjusted EBITDA and adjusted earnings per share through 2027. Finally, our significant success with asset sales to date, as well as the outlook for the near future, gives us great comfort in our long-term funding plans. With that, I would like to open the call for questions.

Thank you. Our first question comes from Nick Campanella with Barclays. Your line is open. Please go ahead.

Hey, good morning. Thanks for taking my questions today and appreciate all the update. I guess you originally had a 3% to 5% EBITDA target when you put out that analyst day range. Then I guess the EBITDA guidance that you gave today for fiscal 2024 does seem to just be a bit flat versus that growth outlook. Is that just from the timing of asset sales? Could you just help clarify what's driving that?

Yes. Hey, Nick. It's Steve. That's right. It's primarily because we're ahead on the asset sale target significantly from 2023. We had the $1.1 billion versus the $400 to $600 guidance. That's why the asset sale drag, as there's a lag to when we redeploy the capital and it's yielding again, is about $200 this year. A little higher than what we would have anticipated a year ago. Overall, good news for the business, but it is offsetting the growth that's coming from the rate base and utilities in the renewables projects. That's right.

That's helpful. Then just on asset sales, to the extent that you're continuing to be successful here and doing more versus what you have in this plan, is there room to offset that $1 billion apparent debt issuance? Does that change at all? Where exactly is there flexibility in this plan today from your perspective? Then could you just also update us on where your leverage targets are and your minimums in this new plan? Thanks.

Yes, the investment grade remains a top priority for us. We have crafted our plan to achieve the investment grade targets we've set. We included a buffer within the metrics, but it's important to note that the quality and duration of our cash flows are undergoing significant changes. We are moving towards longer average contract durations, with many agreements extending to 20 years. This involves Clean Energy initiatives, which carry no carbon risk. The contracts are denominated in U.S. dollars and are primarily with large corporations, including major tech companies and data center clients, which represent high-quality credit. Both our credit metrics and the quality of cash flows are improving. While we do not factor in these improvements when determining new debt levels, we focus solely on metrics, though the overall quality is advancing. Regarding asset sales, our target remains focused on achieving it through various means, with some conservatism incorporated into the overall expectations. We have taken into account any short-term dilutive effects in the figures provided, but there is flexibility if necessary. On the debt front, maintaining the investment grade is of utmost importance.

Alright. I'll leave it there. I really appreciate it. Thank you.

We now turn to David Arcaro with Morgan Stanley. Your line is open. Please go ahead.

Great. Good morning. Thanks so much for taking the questions. I wanted to dig in a little bit on the higher return levels that you're projecting here. Was there something that sparked it? Any kind of catalyst that has pushed you up in terms of the higher return levels in the renewables business? You've been in a higher interest rate environment, obviously, for a while, higher PPA price environment for a while. Is it more the mix of end customers that you're selling to now?

David, I'd say it's a combination of things. First and foremost, the returns that we are seeing on prior PPAs that we signed. So that's the first. We are seeing that we're getting higher returns. Second, what is driving these higher returns? You may recall for some time, maybe like three years ago, starting three or four years ago, I started saying that in select markets, there would be really a shortage of good renewable projects. These are markets like California, PJM, New York. What we started to do was position ourselves and actually enter the queue, buy land rights, etc., to have projects to be able to fulfill this. I think that part of it is in these select markets, you are starting to see the shortage of renewables that we had been seeing. I think this is something that will spread market to market. It's not going to be true for all markets. Out West, there's a lot of land. There's not that much demand, but in select markets, you will be seeing that. I think that's also part of the result is that we are positioned in the right markets. The third thing I would say is that we're becoming more efficient in our construction and in our development process. Stay tuned. I think that will continue to improve. Realize that 2021, you had a lot of supply chain disruptions. Those are well past us and we're really getting to optimize that. Based on our greater efficiency, what we're seeing is that we are getting higher returns. We've also positioned ourselves, this is about our fourth year, fifth year of really positioning ourselves with large corporate customers. Those corporate customers have very strong demand growing very quickly. If you ask me from a sector point of view, I think the real question is, can we meet the demand that they have for Clean Energy in all of these markets? By the way, I would add Chile is a similar market to California where there's a real shortage of projects. There's a very strong demand from our customers and that we're very well placed. This is not like a catalyst. We had several pieces which played out as we expected them to play out.

The only thing I would add, David, is that looking at 2023, what we signed up was well within that new updated range.

Okay, thanks. That's good to hear. Then in terms of the higher growth rates that you've outlined today, wondering if we could just unpack that a little bit. Is that all coming from the renewables segment in terms of the higher returns that you're seeing or is the utilities business or energy infrastructure also experiencing higher EBITDA growth outlooks here?

What you have is both. I think there are two key segments. One is the utilities. We have some of the fastest-growing utilities in the U.S. Second, yes, we are also seeing better returns in the renewable sector. The combination of those two is resulting in a faster growth rate.

Okay, great. Thanks so much.

Thank you.

Our next question comes from Julian Dumoulin-Smith with Bank of America. Your line is open. Please go ahead.

Hi there. Thanks for taking my question. This is Cameron Lochridge on for Julian. I wanted to start with the raised growth expectations. Regarding the last question, if I look at your planned EBITDA contributions across the different businesses—45% renewables, 32% utilities, and 23% energy infrastructure in 2027—how has that mix changed in light of these raised growth expectations?

Yes. I would say the mix will likely lean more towards renewables, which are generating higher returns, possibly above 45 to 50 percent. Utilities, as mentioned by Andres, will have a larger share. Regarding energy infrastructure, we have communicated that it will decrease as we proceed with the coal exit plan. Although we have extended this plan to 2027 for a small number of assets, the dilution from these coal exits will be stretched over a longer period, which should be beneficial for our financials. So, we expect more renewables, an increased share of utilities, and slightly less shrinking in energy infrastructure, but it will remain within the same range.

Got it. And then just digging in on the renewables, just the cumulative capacity additions you guys have communicated, tripling the bag to 25 to 30 gigawatts of cumulative additions, is that still the case through 2027? Or is that bumped higher? Or is this purely just a function of returns improving? And then on that returns improving piece, how do we think about the bifurcation between, perhaps more ability to capitalize on IRA credits versus just true economic improvement vis-à-vis PPAs, pricing increasing. Just kind of help us unpack that a little bit.

Let me sort of give a big picture, and then I'll pass it off to Steve. Look, what we're going after, really, as I said in my script, is really going after those projects, which provide the best financial benefits. You've known me for a while, I've never gone for growth for growth's sake. So really, what we want to do is maximize shareholder value on a per-share basis. So really, this is an upgrading of the quality of the growth, more than a greater numeric growth. Now I do think that it's very important to understand sort of what market segments we're in. We're in the corporate segment, but we're also very heavily into the data center segment. And this is something, again, we've been working on for many years. We have really very good relationships with key clients, and that is a demand that's growing very quickly. And certainly, that we don't mention in our speech, quite frankly, because it's very early times. But we're really going to go after artificial intelligence as an efficiency improvement in the company. And we have a big kickoff meeting that we're going to have in the next couple of months. But this is something I think we've taken in a very sort of strategic line. Inderpal Bhandari, who was the global Chief Data Officer for IBM until 2023 has just joined our Board, and somebody who is very knowledgeable in the area. We also have Janet Davidson, who's also a PhD in computer science. It's interesting. I mean, right now, with Inderpal, we have 5 PhDs on our Board, which has got to be one of the highest percentages in things that run from computer science to finance to economics of business. So, that's what I wanted to put it in. What we're pursuing is returns, we're pursuing value per share. And I think we've been very systematic now for many years in positioning ourselves in a given sector and learning about and preparing ourselves for the new technologies which are coming. So, there's a lot of buzzwords of AI. Well, what's behind this is 5, 6 years of getting ourselves in a position to really utilize the data and have the understanding of the company. So, with that, I'll pass it off to Steve to answer the other parts of your question.

Yes. No, I agree wholeheartedly that we're focused on cash returns, and that's primarily where the higher growth is coming from. You'll notice that it was really the EBITDA growth rate that ticked up the most. And so not really from tax credits. So, we had already talked about that about 40% of our pipeline was in energy communities that continues to be roughly the case. So, it's really from the cash generation of the assets that the increase in rates is coming up. And we're less focused on megawatts. So, it's roughly a similar amount of capital, maybe even a little bit lower. But if that means less megawatts, that's okay. We're focused on what are the best returns that we can get for our capital that's deployed. And that's cash based and not based on the credit.

Got it. Awesome, guys. Thank you very much.

Alright. Thank you.

Our next question comes from Durgesh Chopra with Evercore ISI. Your line is open. Please go ahead.

Good morning, team. Thank you for your time. I wanted to inquire about the new projects, specifically the 3.6 gigawatts expected to be added in 2024. You've exceeded your initial 5-gigawatt target for renewable signing, reaching 5.6, which is impressive. However, I'm curious why the amount of gigawatts entering commercial operation appears to be flat compared to 2023. Is this mainly due to project timing? I anticipated a significant increase with the new projects coming online.

Yes, that's a good question. 2023 was a significant year for us as we doubled our construction activities. We've mentioned that we won't sustain that level of growth annually. Currently, we are signing over 5 gigawatts of new power purchase agreements each year, and eventually, those numbers will align. However, we won't be able to inaugurate around 5 gigawatts next year due to project timing. Additionally, we have a developing transfer project that, while not in our backlog, is part of our signing activities and contributes to this situation. This is not indicative of any concerns; it's simply a matter of timing for our projects. We are confident that we will commission all projects on schedule and within budget this year. We have secured all major equipment, with 80% already on-site, which is unprecedented for us at this stage. Another important point is that our earnings profile will reflect a shift; last year was very back-end loaded due to rapid growth. As we move towards a more stable growth phase, we anticipate 40% of our earnings will come in the first half of the year and only 60% in the second half. We have worked hard to achieve this balance. In 2024 and 2025, you'll see a catch-up in the amount of power purchase agreements we are signing.

Got it. Thank you for that Andres. And then maybe, Steve, can I just go back to Nick's question earlier on credit metrics. Can you remind us where you’re ending FFO to debt in 2023 and then where are you projecting 2024 to be versus your credit downgrade thresholds? Thank you.

Yes, I had no problem to guess. So we had a solid year-end on the credit metrics. So our thresholds are at 20% FFO to debt and we were roughly at 22% approximately. We do keep at least a very strong cushion that’s very healthy. And going forward that ratio is actually improving over time in our plan. So for the end of 2024, I would expect it to be at least at 22 if not a little bit higher than that. So the leverage of the company overall, we do get a lot of questions about it, but it is important to keep in mind we have a recourse, not recourse structure. And particularly in the non-recourse debt, this is amortizing debt. I think not everyone is doing it that way and so our project debt is really amortizing and it serves by the cash flows from the projects. The parent debt level is actually going to be, it will come up a little bit over the planned period, but not a lot. So, it's $4.5 billion now. And as I said in my comments on the slides, maybe another 1 to 1.5 over the 4-year period, but it's going to be pretty stable.

I appreciate that. Thank you very much.

Thank you.

Our next question comes from Angie Storozynski with Seaport Research Partners. Your line is open. Please go ahead.

Thank you. I was curious if you're experiencing any decline in EBITDA or cash flow generation from your existing assets. We've noticed some issues on the wind side, particularly with OpEx and CapEx, which is leading to re-powerings. While there is positive momentum from new builds, are there any drawbacks coming from the existing assets?

Hi, Angie. No, none whatsoever. In fact, as I said, we continue to operate better. And we are seeing that our older projects are giving the returns that we are actually giving better returns than we had forecast. So, we're not seeing that. I mean, we don't have perhaps that many older wins. We do have awful low gap, but we have not seen any degradation in performance.

Okay. And then the second question. So I remember in the past, you were mentioning that the slightly delayed coal plant retirements could be a lever for actually both earnings and cash flow. So is there an update there?

Yes. So Angie, as I mentioned, there are just a few assets that we've extended through 2027, mainly because the contracts have a short remaining duration, making it both operationally and financially sensible for us to retain ownership until the end. There are two benefits to this approach. First, it mitigates the $750 million decrease in EBITDA from the coal exit plans over the years 2025 to 2028, preventing any abrupt decline. Second, it contributes positively to EBITDA over that timeframe, although it is a smaller factor. The primary reason for the increase in EBITDA is the improved returns we’re achieving on our renewable projects, thanks to the market conditions that Andres discussed, as well as the productivity and scale advantages we’ve gained in the portfolio, which we expect to continue as we expand further.

Yes. I would like to add that we still plan to exit coal by the end of 2027, and after 2025, we will operate a plant of about 1 gigawatt. This is partly due to the necessity of these plants for system stability, so we cannot shut them down immediately. I just wanted to clarify that our strategic objective remains unchanged, though it is slightly delayed.

Okay. Thank you.

Thank you.

We now turn to Ryan Levine with Citi. Your line is open. Please go ahead.

Good morning. Given the scarcity of data center projects, how are returns for these projects compared to the projects for other customers?

We don't discuss individual projects, but we do share information about our averages. The return on a project depends on having the right location and offering something beyond the standard. Overall, I can say that we are seeing an increase in our average returns, both historically and looking ahead, and our corporate customers remain our key segment. However, we won't provide comments on specific client areas.

Okay. And then how did you arrive at the 2% to 3% long-term dividend growth is the right growth rate from a financial policy standpoint? And what are factors that could cause that policy to continue to evolve?

Ryan. So look, I mean AES has established itself as a dividend payer a long time ago. We've been consistently growing the dividend at that 4 to 6 range for quite a long time. Obviously, the company's success in the renewable space and now our utilities position for significant growth, has put us in front of a huge amount of growth opportunity, and we want to manage our capital sources appropriately. And so we are committed to our dividend. We want to continue to grow, but we felt on balance given the capital opportunities in front of us and the higher returns that growing the dividend at a little bit of a lower rate made sense at this point, particularly as we've seen higher returns coming from our growth investments.

Okay. And why start that in 2025 as opposed to another year from a timing standpoint?

We grew by 4% this year. This is a policy we take very seriously and thoughtfully. We made the decision towards the end of last year and weren't ready to do so until we had thoroughly analyzed it. We finalized our plan recently and believe it makes sense to implement this decision as soon as possible, which will be in 2025.

Thank you.

Thank you.

Our final question today comes from Gregg Orrill with UBS. Your line is open. Please go ahead.

Thank you, and congratulations. I have a detailed question regarding the 2024 tax credit guidance of $1 billion. Is there any aspect of that related to timing or something you would consider one-time in nature? Or do you expect to increase that amount as you add more renewable projects?

Yes, it will grow, and it's more about the business's success than timing. As Andres mentioned, we doubled our construction last year. Additionally, keep in mind that not all credits are recognized in the first year of tax equity structures; about one third are recognized in the second year. This helps boost the credits this year along with all the new projects coming online. Another factor is that the transfer of credit is recognized earlier, mostly in the first year, contributing to a higher mix of transferred credits this year. I expect this trend to continue rising in the coming years as our growth program advances. We are also benefiting from the energy community adder, which significantly increases the credit. Our wind projects are qualifying for domestic content, which further drives up the credit value. It's important to note that the credit translates to cash and earnings. Especially with investment credits, which make up the majority of our tax attributes, we see substantial returns on capital investment right away—typically 30% to 50%—providing an excellent cash and earnings profile.

Okay, thanks.

This concludes our Q&A. I'll now hand back to Susan Harcourt, Vice President of Investor Relations, for final remarks.

We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Thank you, and have a nice day.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.